Virus measures put major dent in India's GDP

MUMBAI/NEW DELHI－India's economy suffered a historic 23.9 percent decline between April and June this year, official figures have showed, as manufacturing and productivity were battered by a strict coronavirus lockdown.

The contraction was the biggest since India started publishing quarterly statistics in 1996, and the latest figures came as the country's coronavirus cases surged past 3.6 million.

The steep dip in Asia's third-largest economy reflected the impact of a monthslong nationwide shutdown that saw most industrial and manufacturing activity grind to a halt.

The virus restrictions dealt a severe blow to an economy already struggling with a protracted slowdown through 2019, hit by the twin shocks of shrinking consumer demand and rising unemployment.

The decline was worse than expected, with a survey of economists by Bloomberg earlier predicting a contraction of 18 percent.

"The GDP contraction numbers are much worse than expected and clearly shows the economic recovery expectations are slower than believed," said Abhimanyu Sofat, head of research at IIFL Securities, an Indian domestic brokerage, adding that this could lead to further fiscal and liquidity stimulus.

On Monday, the government warned the figures could be revised further since the pandemic had also affected the ability to collect accurate data on economic activity.

The sudden shutdown from late March prompted a huge exodus by millions of migrant workers who fled cities for their villages due to a lack of food and money.

Many have yet to return even as restrictions have eased, leaving factories struggling with labor shortages.

"This is a health crisis that has metamorphosed into an economic crisis," said Sameer Narang, chief economist of State Bank of Baroda. "Manufacturing, trade, construction, transport and communication have all suffered."

With the exception of agriculture, which registered modest growth, every other sector showed sharp losses. Construction activity was halved, while manufacturing plummeted by nearly 40 percent compared to the previous year.

Daily wage earners and small-business owners were hit particularly hard, with Mumbai-based shopkeeper Himanshu Patel saying he dipped into his savings for months to keep his store afloat.

"This has been the worst period of business we have ever seen in our lives so far," the 43-year-old said.

$266 billion package

Indian Prime Minister Narendra Modi had announced a $266 billion package－10 percent of the country's GDP－to revive the battered economy. India's central bank has slashed interest rates and transferred billions of rupees in annual dividends to the government.

But the measures have yet to yield any positive economic impact or spur a pickup in demand, while inflation has jumped to over 6 percent－far above the bank's target range of 4 percent.

Opposition leader and former finance minister P. Chidambaram criticized the government for "doing nothing, literally nothing, to cushion the fall by taking suitable fiscal and welfare measures".

As the economy has contracted, coronavirus infections have hit fresh records across the country. India on Monday reached almost 65,000 virus deaths, overtaking Mexico with the world's third-highest toll behind the United States and Brazil.

The nation of 1.3 billion also has the third-highest number of infections worldwide.

The lockdown has failed to contain the spread of the disease, which has traveled from crowded cities to remote villages.

Agencies - Xinhua